Ethereum (ETH) launched in 2015 and pioneered smart contract blockchains.
Although Bitcoin set the foundation for cryptocurrencies as an asset class, Ethereum opened the door to crypto-based computational networks. Ethereum’s token, ETH, was released in a token sale in 2014, allowing early investors to buy ETH with BTC.
Validators earn ETH for securing the blockchain, and users pay ETH as network fees. Further, ETH is now used to power countless decentralized finance (DeFi) protocols, blockchain games, non-fungible tokens (NFTs), and more.
Ethereum's Origins
Ethereum was launched by Vitalik Buterin and other co-founders and introduced smart contracts to the blockchain ecosystem. Unlike Bitcoin, whose primary functions were as a store of value and medium of exchange, Ethereum aimed to be a decentralized world computer and enabling the creation of decentralized applications (dapps).
ETH Price Charts and Market Dynamics
Generally, the cryptocurrency market moves up and down as a unit, though the degree of movement can vary among different coins and tokens. Because of its long-held position as the second most valuable crypto in terms of market cap, ETH’s price fluctuations more closely follow BTC than the altcoin market, meaning it has shown slightly less volatility than the rest of non-Bitcoin cryptocurrencies. As such, ETH has historically trended with (or slightly lagged) BTC in its bull and bear markets, and many consider it a market setter than a purely speculative asset.
Still, its unique use case has set it apart from BTC and offered it slightly different strengths and weaknesses. Traders have used technical analysis to predict ETH’s price movements, as they have with BTC and other assets, like stocks.
While Ethereum's price has historically shown a strong correlation with Bitcoin, ETH's unique use cases in DeFi, NFTs, and other areas have also led to periods of divergence.
Ethereum price history: key milestones
ETH gained traction slowly in its early years but exploded during its true major bull run in 2017-2018, rising from $10 to nearly $1500. Despite a subsequent dip, ETH solidified its position as a leader among cryptocurrencies behind Bitcoin.
Just like other assets, ETH’s price fluctuates according to supply and demand. In ETH’s case, these dynamics have changed significantly over time, creating a large-scale experiment demonstrating how a cryptocurrency’s “ okenomics” can influence the price of an asset. For instance, unlike Bitcoin, ETH has never had a fixed maximum supply. However, there are rules that govern ETH issuance. When Ethereum was a Proof of Work (PoW) blockchain, it promised gradual production of new ETH, and the supply grew accordingly. Some key moments in its history:
- 2014: The initial coin offering (ICO) for Ethereum, raising funds for development.
- 2015: The official launch of the Ethereum mainnet.
- 2016: The DAO Hack: A major security breach in The DAO, a decentralized autonomous organization built on Ethereum, leading to a hard fork and the creation of Ethereum Classic (ETC). This was a pivotal moment that tested the community's response to a crisis.
- 2017-2018: Driven by the explosion of ICOs on Ethereum , ETH's price surged to nearly $1,500.
- 2019: Istanbul Hard Fork: Several Ethereum Improvement Proposals (EIPs) were implemented, improving network efficiency and security.
- 2020: The emergence of DeFi protocols on Ethereum began to drive significant usage and demand for ETH.
- 2021: The combination of DeFi's continued growth and the explosion of NFTs propelled ETH's price to nearly $5,000.
- 2021: The London Hard Fork (EIP-1559) upgrade introduced a fee-burning mechanism, changing ETH's tokenomics and impacting its supply.
- 2022: The Merge helped Ethereum transition from a PoW consensus mechanism to PoS, significantly reducing energy consumption and altering ETH's issuance.
- 2022: The collapse of the FTX exchange had a negative impact on the entire crypto market, including Ethereum.
- 2023: The Shapella Upgrade ( hanghai + Capella) enabled the withdrawal of staked ETH, a crucial step after The Merge.
The Impact of EIP-1559 and The Merge
The 2021 London upgrade introduced EIP-1559, with a mechanism to burn (destroy) part of the supply. This predictably slowed the growth of ETH’s circulating supply, which further plateaued—and even began to decline—with The Merge in 2022, as Ethereum transitioned to a Proof of Stake (PoS) chain. The decreasing supply paired with increasing demand generally results in rising prices.
Other factors affecting the price of Ethereum
- Market Sentiment: News, social media, and overall market confidence.
- Regulation: Government policies and regulatory frameworks.
- Technology Updates: Protocol upgrades, scalability solutions, and security improvements.
- DeFi and NFT Activity: The usage and growth of dapps on the Ethereum network.
- Competition: The performance and adoption of competing Layer-1 blockchains.
- Macroeconomic Factors: Global economic conditions, inflation, and interest rates.
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Ethereum price trends essentials
- Ethereum's price history is marked by significant bull runs (2017-18, 2021) driven by adoption and market trends, interspersed with corrections, reflecting the volatility of the cryptocurrency market and its close correlation with Bitcoin's price movements.
- Ethereum's transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS) via The Merge in 2022, along with the EIP-1559 upgrade, significantly altered ETH's tokenomics by introducing a burning mechanism and impacting its supply, influencing its price dynamics.
- Beyond its core function as a cryptocurrency, ETH's price is influenced by a variety of factors including market sentiment, regulation, technological updates, the growth of DeFi and NFTs on its network, competition from other blockchains, and broader macroeconomic conditions.